Biodiesel Market Report

The transportation sector remains the leading segment of growth in the global biodiesel market, fueling demand and expansion. Governments worldwide are becoming stricter on emissions regulations and are pushing biofuel blending into diesel even higher in order to cut greenhouse gas emissions. Policies like the European Union’s Renewable Energy Directive (RED II) and similar mandates in the United States and Brazil are pivotal in expanding biodiesel use in transport. Furthermore, as reliance on existing diesel engines and refuelling infrastructure is a great start in introducing an alternative, biodiesel is affordable and sustainable for energy security against fossil fuel dependence. As electric vehicles proliferate, biodiesel will remain extremely important in heavy and hard-to-electrify vehicles such as trucks and ships. This segment will be in the lead and continue to drive the market for long period of time.

The vegetable oil segment leads the global biodiesel market due to its well-established supply chain, reliable availability, and cost-effectiveness. Oils such as soybean, canola, and palm oil are highly produced worldwide and thus, available in higher quantities for biodiesel. Moreover, the infrastructure for processing vegetable oils is very developed, making it scalable and efficient. Biodiesel from vegetable oil has a higher energy density and quality, hence good compatibility with engines, low emissions, and is far superior to biodiesel derived from other feedstocks. Government policies, subsidies, and sustainability initiatives have further consolidated its position, promoting the continued use of vegetable oils in biodiesel. This established market presence, combined with strong agricultural synergies, ensures vegetable oils remain the dominant feedstock in the biodiesel industry.

The major driver for the growth of the biodiesel market is the government policies and regulations. The United States, Brazil, and the European Union are among the countries that have adopted policies on the encouragement of biodiesel use. For instance, the United States has a Renewable Fuel Standard which sets minimum annual percentage of transportation fuels to be made up from renewable sources, including biodiesel. A leading biofuel producer like Brazil also had an incentive and support package in the form of the Proalcool Program through subsidies and tax breaks in terms of ethanol and biodiesel. The European Union, likewise, targets renewable energy that obligates each country in the member nations to add more to biodiesel in general fuel blends. Policies and mandates not only provide affordable fuels for industry and vehicles but also drive industries to explore alternative options.

Counterfeit biodiesel often made from low-quality or non-sustainable feedstocks like palm oil, can create a threat to the market. For instance, in 2023, International Sustainability and Carbon Certification (ISCC) suspected cases of mislabelling of advanced biodiesel imported from China such as counterfeiting impacting the European biofuels market. However, the high production costs are one of the major issues that the biodiesel industry is encountering. Feedstock prices of vegetable oils (soybean, palm oil), animal fats, and waste oils determine high production costs. Under such materials, prices change with fluctuations in agricultural commodity prices. These price fluctuations are more influenced by weather conditions, global demand, as well as supply chain disruption, and other factors disturbing the market equilibrium. Although biodiesel is scalable, it is at a disadvantage compared to fossil fuels due to the high production costs making it unsuitable at low crude oil prices without subsidies or government support for adoption in mass production.

Large-scale cultivation of crops for biodiesel production has raised concerns over land use water consumption, and deforestation. Criticism has been directed towards biodiesel with special reference to developing countries. For instance, palm oil cutting is very closely linked to deforestation and habitat destruction. Biodiesel is mostly outclassed by many other biofuels, of which ethanol and bioethanol are the two most popular and sufficiently produced from crops such as corn and sugarcane. In most regions, such as the United States and Brazil, ethanol is the biofuel, benefiting from established infrastructures, cheap production costs, and government mandates. In addition, renewable diesel, chemically very similar to biodiesel, has already gained momentum due to higher performance and compatibility with existing diesel engines.

Major market players utilize marketing strategies involving product innovation, the acquiring of new companies, and merging with others to expand their customer base and improve their offerings. In November 2024, Novonesis launched Eversa Advance a novel biosolution created to implement changes in the efficiency and sustainability of biodiesel feedstock processing. Targeting those feedstocks containing free fatty acids (FFA) of up to 20%, helps producers cope with difficulties posed by feedstock variability. From pre-treatment costs dropping up to 45% to reduced environmental impact, Eversa Advance improves operational efficiency.

Furthermore, in August 2024, Bolivia President Luis Arce introduced a financial and fiscal incentive-driven program to induce national biodiesel production. This initiative announces a zero percent tariff on machinery and equipment imports destined for biodiesel plants, besides making it VAT-free on such inputs. Its main purpose is to boost private investments and encourage sustainable development, enhancing raw material productivity via advanced technologies.

Moreover, in March 2023, Sarens supported Cargill in the maintenance of its biodiesel processing plant in Ghent, Belgium. Sarens utilised an LTM1150 crane to assist with the disassembly and overhaul of key equipment involved in the transesterification process. This collaboration improved plant efficiency, contributing to the increased production of biodiesel from recycled oils. The successful operation strengthens Cargill's role in the European biodiesel market and supports the shift towards more sustainable fuel sources.

The dominance of the Europe biodiesel market can be attributed to stringent environmental policies and ambitious renewable energy targets. The Renewable Energy Directive (RED II) of the European Union mandates increased consumption of biofuels and will mobilize demand, particularly for biodiesel in transport. According the United States Department of Agriculture (USDA) statistics, consumption of biomass-based diesel in Europe increased in 2023 from 17.89 billion liters to 17.98 billion liters, with most biodiesel producers and consumers being Germany, France, and Italy. Indeed, it has opened doors for Europe to progressive steps toward sustainable biofuels, much faster employing waste-based feedstocks or producing second-generation biodiesel.

In North America, the production of biodiesel has been steadily increasing due to strong government support for renewable fuels. One of the major programs in the United States that promotes biodiesel use is the Renewable Fuel Standard, which prescribes ambitious targets for blending biofuels into transportation fuels. Together with United States technology and engineering design and production, numerous feedstocks available in the North American continent such as soybeans and used cooking oil would furnish biodiesel feedstock development and production. Environmental awareness and growing demands for energy solutions have continually enlarged the biodiesel market.

As per the Energy Information Administration (EIA), the United States consumed 2,659 trillion British thermal units (BTUs) of biofuel in 2023. This indicates the growing importance of biodiesel in the national energy landscape. Also, as per the data of SecomVc Government Administration (Brazil), the production of biodiesel and ethanol in Brazil reached 43 billion liters for the year 2023 which makes America an overall lucrative market for the biodiesel market.